Correlation Between GlaxoSmithKline PLC and Scilex Holding

Can any of the company-specific risk be diversified away by investing in both GlaxoSmithKline PLC and Scilex Holding at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GlaxoSmithKline PLC and Scilex Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GlaxoSmithKline PLC ADR and Scilex Holding, you can compare the effects of market volatilities on GlaxoSmithKline PLC and Scilex Holding and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GlaxoSmithKline PLC with a short position of Scilex Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlaxoSmithKline PLC and Scilex Holding.

Diversification Opportunities for GlaxoSmithKline PLC and Scilex Holding

-0.85

Correlation Coefficient

GlaxoSmithKline PLC  Scilex Holding

Pay attention - limited upside

The 3 months correlation between GlaxoSmithKline and Scilex is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding GlaxoSmithKline PLC ADR and Scilex Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scilex Holding and GlaxoSmithKline PLC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GlaxoSmithKline PLC ADR are associated (or correlated) with Scilex Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scilex Holding has no effect on the direction of GlaxoSmithKline PLC i.e., GlaxoSmithKline PLC and Scilex Holding go up and down completely randomly.

Pair Corralation between GlaxoSmithKline PLC and Scilex Holding

Considering the 90-day investment horizon GlaxoSmithKline PLC ADR is expected to generate 0.11 times more return on investment than Scilex Holding. However, GlaxoSmithKline PLC ADR is 8.85 times less risky than Scilex Holding. It trades about 0.15 of its potential returns per unit of risk. Scilex Holding is currently generating about -0.06 per unit of risk. If you would invest  3,369  in GlaxoSmithKline PLC ADR on December 23, 2024 and sell it today you would earn a total of  555.00  from holding GlaxoSmithKline PLC ADR or generate 16.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

GlaxoSmithKline PLC ADR  vs.  Scilex Holding

GlaxoSmithKline PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GlaxoSmithKline PLC ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, GlaxoSmithKline PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with GlaxoSmithKline PLC and Scilex Holding

The main advantage of trading using opposite GlaxoSmithKline PLC and Scilex Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlaxoSmithKline PLC position performs unexpectedly, Scilex Holding can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Scilex Holding will offset losses from the drop in Scilex Holding's long position.

The idea behind GlaxoSmithKline PLC ADR and Scilex Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Valuation module to check real value of public entities based on technical and fundamental data.